April 1 (Bloomberg) -- After years of holding back as
Europe lurched from crisis to crisis, the region’s large
companies are staging a deal-making comeback.

Western European buyers announced $149 billion of
acquisitions in the first three months of the year, a nearly 60
percent gain over the start of 2013 that outpaces the increase
from North America and Asia, data compiled by Bloomberg show.
Led by telecommunications, media, and technology companies, the
value of announced acquisitions worldwide rose about 26 percent
to $637 billion, the best start to a year since 2007 -- before
the global financial crisis.

Shareholders are rewarding risk-taking buyers, and
motivating chief executives to strike large deals while interest
rates are still low. Shares of Altice SA, the cable company
negotiating Europe’s largest deal this year -- the purchase of
Vivendi SA’s French wireless business SFR -- jumped as much as
16 percent when it was picked for exclusive talks, while those
of rival bidder Bouygues SA tumbled.

“CEOs have gotten their arms around their businesses and
are more optimistic that they can operate within the context of
an improving economy,” said Hernan Cristerna, global co-head of
M&A at JPMorgan Chase & Co. in London. “Shareholders are
betting on a robust economic recovery so they’ve become more
aggressive in asking for transactions.”

Business Confidence

Technology and communications companies -- from Comcast
Corp. to Facebook Inc. -- announced $174 billion of takeovers
globally, the data show. Spending by Asian buyers rose by about
41 percent from a year earlier while North American companies
boosted spending by 18 percent during the quarter.

In Europe, interest rate cuts and central bank pledges to
buy the bonds of crisis-hit countries have boosted business
confidence. The euro-area economy grew more than economists
expected in the fourth quarter of 2013, and surveys of
purchasing managers published in March showed manufacturing and
services activity is near the strongest in almost three years.

Car sales in the region rose for the sixth consecutive
month in February as an economic revival and price cuts helped
boost demand for new models from Renault SA and Volkswagen AG.

To be sure, as last year showed, a strong start in
dealmaking can fizzle in the face of unexpected shocks. After
the first two months of 2013 were marked by takeovers of Dell
Inc. and H.J. Heinz Co., the rest of the year was characterized
as one of executive caution amid concern over U.S. spending
cuts, leadership changes in China and Europe’s debt crisis.

Russia Risk

“Deals so far have been well received but for this
positive momentum to continue, companies need to see any lasting
economic and macro concerns recede even further into the
background,” said Mark Warham, the London-based head of M&A in
Europe, the Middle East and Africa at Barclays Plc.

Few would’ve predicted Russia annexing Ukraine’s Crimea
region, which roiled equity markets. Sanctions being imposed by
the U.S. and Europe as a result highlight the potential impact
on Russian companies, which made $180 billion in deals globally
in the past two years.

The biggest Russia-related transaction this year -- German
utility RWE AG’s sale of its oil and gas unit to a group led by
Russian billionaire Mikhail Fridman -- was accelerated out of
concern about sanctions, a person with knowledge of the matter
said.

Consolidation Urge

The urge to consolidate power drove dealmaking by telecom,
media and technology -- or TMT -- companies which are seeking
scale to build high-speed networks, negotiate with content
providers and respond as customers change the way they access
the Internet and watch TV.

The biggest deal so far this year was Comcast’s $45.2
billion agreement in February to buy Time Warner Cable Inc. and
create a bulwark against competition from phone and satellite
providers. Facebook made a $19 billion offer for messaging
service WhatsApp Inc. also that month. Vodafone Group Plc in
March agreed to buy cable provider Grupo Corporativo Ono SA for
$10 billion to boost TV and broadband offerings in Spain.

While Altice is holding talks for Vivendi’s SFR, the hunger
for telecom assets means Bouygues has boosted its competing
offer to over $18 billion in cash. Altice itself is weighing
plans to raise the cash component of its offer, people with
knowledge of the matter said today.

“M&A activity is being driven by convergence,
consolidation in individual mobile markets and an evolving
regulatory environment,” said Adrian Mee, the London-based head
of international M&A at Bank of America Corp. “Also, companies
have large amounts of cash, particularly in the tech sector.”

This is likely to continue. AT&T Inc. remains interested in
a takeover of Vodafone, people familiar with the matter have
said, and Sprint Corp., the U.S. carrier owned by Japan’s
SoftBank Corp., is exploring a tie-up with T-Mobile US Inc.

Mid-Size Market

Morgan Stanley and JPMorgan are leading the global advisory
ranks, followed by Goldman Sachs Group Inc., according to data
compiled by Bloomberg. Citigroup Inc. and Barclays round out the
top five.

Critically for the investment banks, the smaller deals that
generate a greater share of investment banking revenue are also
on the rise. The value of deals smaller than $5 billion in size
rose about 23 percent to $97 billion in Western Europe during
the quarter, the data show.

“In addition to the very large transactions, we are also
seeing some momentum in medium-sized deals, which is the
mainstream of the M&A market.” said Henrik Aslaksen, head of
M&A at Deutsche Bank AG in London.

Third Engine

Large transactions involving consumer companies, meanwhile,
are adding “a third engine to the M&A recovery” in addition to
health-care and TMT deals, according to Gregg Lemkau, the global
co-head of M&A at Goldman Sachs in New York.

In January, Japan’s Suntory Holdings Ltd. agreed to buy
Beam Inc. for $16 billion including debt to gain brands such as
Maker’s Mark whiskey. In March, Albertsons, the supermarket
chain owned by Cerberus Capital Management LP, said it would pay
about $9 billion for rival Safeway Inc.

“Conditions for dealmaking have been quite good for the
last couple of years, but the mindset has been cautious because
of whatever the looming crisis of the day was,” Lemkau said.
“People now seem to be looking for reasons to do deals, rather
than reasons not to do deals.”